Is Student Debt Standing in the Way of Homeownership?

Student loan balances have doubled since 2007 to well over $1 trillion. Meanwhile, millennials are taking much longer than previous generations to buy their first home.  A recent study examined whether student loan debt is preventing young adults from purchasing homes*.

Surprisingly, the study concluded that there is no causal relationship between student debt and delayed home-ownership.  In fact, debtors in their late 20s were more likely to own a home than non-debtors.  The study gives several alternative explanations for why millennials are delaying their first home purchase when compared to prior generations.  Mainly, the delay in home-ownership seems to be part of a larger trend of delaying the period of life known as “transition to adulthood”.  For example, the share of 18-34 year-olds who are married with children has also fallen from 27% in 2000 to 20% in 2015.

The study did find one major correlation between student loans and delayed home-ownership: student loan debtors who dropped out of college did have much lower rates of home-ownership vs. student loan debtors who graduated from college.

Moral of the story?  If you’re going to take out student loans, it’s better to graduate from college with a degree that leads to a high-paying job.

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*Jason Houle and Lonnie Berger. 2015 “Is Student Loan Debt Discouraging Home Buying Among Young Adults?” 89:589-621, Social Service Review
Source: CMPS Institute